ORIE 350 lecture 14

ORIE 350 lecture 14 - Treasury stock Corporations buying...

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Treasury Stock 3,000,000 3,000,000 2,400,000 1,200,000 Treasury stock Corporations buying its own stock back on the open market Reasons: 1. limit or reduce dividends burden 2. have too much cash, with no good investment opportunities 3. My corporation’s stock is under valued 4. For employee stock ownership plans Accounting 1. Record the treasury stock at the price paid to buy it back 2. It is a stockholder’s equity account 3. It is held for later use 4. When the stock is re-sold for more money than price paid, we do not record this as income 5. The extra goes into a new account, Paid in Capital, Treasury Stock 6. If we sell treasury stock at a price below what we paid, we pull the difference out of retained earnings. But if we have some money in Paid-in capital, Treasury stock, pull it out of there first. 7. Paid-in Capital, Treasury stock cannot be negative(debit balance) ICE 1. Welsh Corporation Apr 1, 2005 Treasury Stock(SE) 6,000,000 Cash(A) 6,000,000 May 1, 2005 Cash(A) 1, 450,000 Treasury Stock(SE) 1,200,000 Paid-in Capital, Treasury Stock(SE) 250,000
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This note was uploaded on 03/30/2008 for the course ORIE 350 taught by Professor Callister during the Spring '08 term at Cornell.

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ORIE 350 lecture 14 - Treasury stock Corporations buying...

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